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Midwest’s board rejects AirTran buyout

The board of directors at Midwest Air unanimously recommended Friday that shareholders reject a buyout offer from AirTran Holdings Inc. worth $389 million.
/ Source: The Associated Press

The board of directors at Midwest Air unanimously recommended Friday that shareholders reject a buyout offer from AirTran Holdings Inc. worth $389 million.

AirTran Holdings, owner of low-cost carrier AirTran Airways, has courted the Milwaukee-based operator of Midwest Airlines, for more than a year. In all that time Midwest has said it prefers to remain independent and called AirTran’s offers “opportunistic.”

Midwest Group Inc. said in a statement that shareholders should not tender their shares to AirTran, calling the latest offer “inadequate.”

“Our board determined that AirTran’s revised offer does not take into account the long-term value of our strategic plan,” said Timothy E. Hoeksema, chairman and chief executive officer.

“The board believes that Midwest’s future holds great promise and that the best interests of all stakeholders lies in Midwest continuing to execute its plan. As the true owners of the company, Midwest shareholders should benefit from the company’s long-term plans to continue to create value.”

AirTran president and chief operating officer Bob Fornaro said the company was not surprised the board rejected the offer again.

“It doesn’t matter what the facts are — their position is they’re going to reject this deal whether the numbers are good or bad,” he said. “The song doesn’t change even though the numbers are changing. We’ve upped our offer and their performance is deteriorating.”

In addition to the Midwest board announcement Friday, the carrier lowered its earnings expectations for the year from $1.70 per share to a range of $1.30 to $1.50 per share. Midwest spokeswoman Carol Skornicka said the lower earnings came about in part as Midwest evaluated the offer from AirTran. The revised earnings reflect a bumpy first quarter, she said, including a series of storms that disrupted air travel.

The latest offer expires May 16. Fornaro said AirTran believed investors would still be tendering their shares. Another rejection means there could be a showdown at Midwest’s annual shareholders meeting, which the company announced on Friday had been pushed back to June 14 from May 23. AirTran has nominated three members to Midwest’s nine-member board of directors.

The latest bid was made on April 2 when AirTran upped its previous offer of $345 million nearly 13 percent, to a cash and stock deal worth $15 a share. AirTran chairman and chief executive Joe Leonard had said institutional investors have told him they would consider selling their shares for $15 each.

AirTran, based in Orlando, first disclosed in mid-December that it had bid $11.25 per share on Oct. 20 for Midwest, but Midwest turned down the $290 million offer on Dec. 6. The first rejection came when Midwest’s board quietly declined AirTran’s first offer of about $78 million, or $4.50 a share, in the summer of 2005.

In January, AirTran raised its offer to $345 million, in a deal worth $13.25 a share in cash and stock.

Midwest’s board of directors rejected the unsolicited buyout offer, calling it “inadequate” and recommending shareholders not tender their shares to AirTran.

AirTran has said a merger made sense, given the two companies’ cultures and geographies. Midwest’s roughly 345 flights a day serve 50 cities, typically in the East and West while AirTran’s 700 flights a day serve 56 cities primarily in the North and South.

Leonard’s visions of a low-cost national carrier would have 1,000 departures a day in 74 cities, generating revenues of $3.5 billion a year.

Hoeksema told the AP in late February that he feared Midwest would lose its charm — and perks like wide leather seats and chocolate chip cookies — if it merged with the low-cost carrier.

But Leonard has said the new company would combine the best of both airlines, including the traditional Midwest perks.